By Brett Kelly
More than 30% of CPA firms have a managing partner aged 60 or older, yet only 55% have a written succession plan. That is a succession crisis. And for many founder-operated practices, it’s an existential crisis.
Suppose a practice with a solid foundation of clients and revenue has a founding partner on the verge of retirement with no one available to succeed them. When that founder exits, the practice enters a fire-sale merger or wind-down that destroys years of accumulated equity.
The conversation around this issue tends to frame it as a recruiting, compensation or perception problem. In reality, it’s a structural problem. The successors are there; they just need a rational path to ownership. And that’s exactly the sort of solution that a good acquisition strategy can provide.
A Bad Deal
The traditional succession model asks a junior partner to buy out the founder at full price, usually financed against their personal balance sheet. For a firm doing $3 million in revenue, the buyout price might sit between $2.5 million and $4 million, depending on the multiple. The partner is expected to service that debt, maintain margins, keep clients happy through a leadership change and somehow grow the practice all at once.
Most people in their thirties and forties look at that deal and walk away. Not because they lack ambition, but because they would be taking on enormous financial exposure without the structural support to make the gamble work. And so, they make the reasonable choice to take a salaried role at a larger firm and leave the practice without a real owner.
Ownership is Alignment
Say, instead, that an acquiring entity steps in and takes 51% while the next-generation operator holds 49% on a long-term deal — 10 years minimum. The acquisition debt sits at the operating-business level, where it has to be serviceable from actual cash flow rather than projected synergies or balance-sheet gymnastics at the parent level.
This is the Partner-Owner-Driver® model, and it means that the successor gets a real ownership stake from day one. They immediately have skin in the game, and the economics are structured so the business has to perform well enough to service its own obligations. If the debt can’t be covered by the cash flow, the deal shouldn’t be made.
The acquiring party provides centralized back-office support on technology, recruitment, compliance infrastructure — all the operational overhead that bleeds a small firm’s time and margin. The operating partner pays a management fee and in return gets to focus on what they’re actually good at, which is looking after their people and their clients.
That trade is where the margin improvement comes from. A typical $2 million–$10 million practice spends a disproportionate share of its partners’ hours on administration, IT and hiring rather than billable advisory. When a central team absorbs those functions at scale, the operating partner recovers capacity that goes straight back into client service and revenue.
I’ve done this more than 90 times across five countries. The model works because it aligns the interests of the person running the business with the interests of the business itself. It’s less of an acquisition and more of a partnership: shared ownership, shared responsibility, shared rewards.
How the Math Plays Out
Take a firm with $3 million in revenue running at a 20% EBITDA margin on a normalized basis, after the operating partner’s market-rate salary. That’s $600,000 in operating earnings. The operating partner’s 49% share is about $290,000 in equity distributions before debt service.
Once centralized operations absorb the administrative drag and the partner redirects that capacity into billable work, I’ve typically seen margins move to 28–33%. On the same revenue base, operating earnings jump to somewhere between $840,000 and $990,000. The partner’s 49% share is now north of $400,000, and the debt service that looked daunting at 15% margins becomes manageable at 30%.
The Principle
The accounting profession is currently perched on a generational ownership transfer that can either create the next wave of industry leaders or destroy decades of accumulated value. A 51–49 split isn’t the only answer, of course, but it rests on a fundamental principle. Successors must own a big enough share of the outcome to make success worth their while, and they must have the support to make it possible.
About the Author
Brett Kelly is the Founder and CEO of Kelly+Partners (ASX:KPG), a specialist accounting network serving more than 25,000 SME clients across 38 locations in Australia, the United States, Hong Kong, India and Ireland. Brett has 25 years of commercial and professional accountancy experience, of which he has spent the last 20 leading Kelly+Partners at a 30% average rate of revenue growth per year, and is the best-selling author of four books.
